Posted by: usset001 | July 15, 2011

Strong corn basis levels in southwestern Minnesota

A week ago I commented on some market maxims concerning the grain basis as taught by Professor Reese Dahl several decades ago.  One of those maxims was “Basis for grains is more erratic in inverted markets.” And how.

The Sep-Dec corn futures spread is inverted, and has been for many months. While a positive basis in the northern half of the Corn Belt is not a common occurrence, stocks are tight and the eastern Corn Belt basis turned positive several months ago. Over the past week, the positive corn basis has now spread to southern Minnesota. The basis for corn ranges from option price to 25 cents over the September contract throughout the southern tier of the state.

In Minnesota, we have not seen positive and widespread basis levels like this since the summer of 1996. From early July to the end of August of 1996, the nearby corn basis in southern Minnesota traded from 50 cents to 125 cents over, an indication that we could go even higher in the weeks ahead.

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